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Comparative effectiveness options in health care

December 18, 2007

CBO just released a report on comparative effectiveness research. Such research holds the potential to reduce health care costs over the long term -- possibly by substantial amounts if it is done rigorously and if its results are ultimately tied to changes in financial incentives for providers and consumers.

Since health care costs represent the nation's central fiscal challenge (see here), today's report -- and others on options to reduce health care costs that CBO will be putting out over the next year or so -- seem particularly important. What's perhaps most interesting about the health care challenge and its fundamental role in the nation's fiscal future is that a variety of evidence suggests that opportunities exist to constrain health care costs both in the public programs and in the rest of the health system without adverse health consequences (see discussion here and in today's report). Comparative effectiveness research may help policymakers capture those opportunities.

One of the reasons that opportunities exist to reduce costs without harming quality is that hard evidence is often unavailable about which treatments work best for which patients and whether the added benefits of more-effective but more-expensive services are sufficient to warrant their added costs -- yet the current health system is geared toward adopting more expensive treatments even when evidence about their impact is lacking.

Generating evidence that compares treatments is what research on comparative effectiveness does. Today's report makes several key points:

Although some comparative effectiveness research is currently conducted by health plans and others, private-sector entities have only a limited incentive to produce or pay for research that could benefit others-including competitors. In addition, the federal government's health insurance programs themselves play a significant role in medical care and the budget, so the government has an interest in generating evaluations of the effectiveness of different approaches to health care -- but to date has generally not demanded such research. These observations provide a motivation for a larger federal role in coordinating and funding (although not necessarily conducting) such research.

Policymakers wanting to expand federal efforts to study comparative effectiveness could organize it in different ways-augmenting an existing agency, establishing a new agency, supporting an existing quasi-governmental organization, or creating a new public-private partnership. In evaluating these options, note that trade-offs could arise between the entitys independence from political pressure and its accountability to policymakers and other interested parties. And the comparative effectiveness effort is more likely to have an impact on medical practice if the organization is respected and trusted by doctors and other professionals in the health sector.

In terms of the actual research, synthesizing existing studies or analyzing available (and non-randomized) data on medical claims would be less expensive than conducting new head-to-head clinical trials to compare treatments but could also yield less definitive results-and therefore might have a smaller impact on medical practice. Randomized clinical trials can be more persuasive, but there is a practical limit to how many comparative trials could be undertaken effectively at any given time -- so some reliance on non-randomized studies is probably required to cover a wide array of topics. Having more health records available in electronic form would facilitate the use of such data for this type of research (and indeed any cost savings from electronic health records and health information technology may ultimately be derived mostly from their indirect contribution to identifying and encouraging higher-value types of care).

To affect medical treatment and reduce health care spending in a meaningful way, comparative effectiveness research would have to change the behavior of doctors, other health professionals, and patients. For example, the higher-value care identified by comparative effectiveness research could be promoted in the health system through financial incentives-the payments doctors receive or the cost sharing that patients face. Making substantial changes in payment policies or coverage rules under the Medicare program to reflect information on comparative effectiveness would almost certainly require legislation. Making such substantial changes in the delivery of health care will undoubtedly prove difficult and controversial.

Generating additional information about comparative effectiveness and making corresponding changes in incentives seems likely to reduce health care spending over time-potentially to a substantial degree. But given the time necessary to conduct the research, to alter incentives in a manner reflecting the results, and to affect behavior through those changes, any potential for substantial cost savings would probably take a decade or more to materialize. Even so, generating the additional information would tend to reduce federal health spending somewhat in the near term-but probably not by enough to offset the full costs of that research over the same time period.

Today's report was written by Philip Ellis, who joined CBO in 2002 and is currently a Senior Analyst. Phil recently coauthored two articles in the New England Journal of Medicine with me (see here and here). He was one of the primary analysts of proposals for a Medicare drug benefit and wrote a detailed report explaining the assumptions and methods CBO used in determining the effects of that legislation. His other work has spanned a variety of health care topics including disease management, the Medicaid program, and Medicare reform, and he recently completed a report on consumer-directed health plans and their potential effects on health spending and outcomes (see here). Prior to joining CBO, he worked on Medicare reform and other health care issues at the Treasury Department and in the office of the Assistant Secretary for Planning and Evaluation at the Department of Health and Human Services.

A life-long fan of the Dallas Cowboys and New York Mets, Phil received his undergraduate training at Stanford University and holds a Masters degree in public policy from Harvard and a Ph.D. in economics from MIT.